JetBlue Airlines 2012 Annual Report Download - page 15

JETBLUE AIRWAYS CORPORATION-2012 10K 11
PART I
ITEM 1Business
Culture
We believe one of our competitive strengths is our service-oriented culture.
Our culture places value upon and stresses the importance of providing
high quality customer service. We believe our highly productive, engaged
workforce allows us to keep our costs low and, ultimately, achieve our
fi nancial goals. Our success depends on our people and their capabilities,
individually and collectively, delivering the best customer service experience
while living our fi ve key values of safety, caring, integrity, passion and fun. We
strive to select, train and maintain a fl exible and diverse workforce of caring,
passionate, fun and friendly people who want to provide our customers
with the best experience possible. Further, our historical experience, as
confi rmed by numerous surveys, reveals customer satisfaction and the
likelihood of returning customers is highly correlated with and can be
directly linked to experiences with engaged Crewmembers.
Our ability to continue to hire, retain, and develop people who fi t within
our Culture and are committed to delivering the JetBlue Experience to
our customers is a key component to maintaining our valuable brand. Our
culture is fi rst introduced to all new Crewmembers through a screening
process and an extensive orientation program which emphasizes the
importance of customer service, productivity and cost control. We reinforce
the importance of this culture by providing continuous training for our
Crewmembers, including technical training, a specialized Captain training
program unique in the industry, a leadership program, training focused on
the safety value and front line training for our customer service teams. Our
emphasis on talent development enables us and our Crewmembers to
be strategically aligned and has resulted in a high rate of internal growth
opportunities for our Crewmembers.
None of our Crewmembers are currently unionized. We believe a direct
relationship between JetBlue Crewmembers and its leaders–not third-party
representation–is in the best interests of our Crewmembers, customers
and shareholders. We enter into individual employment agreements with
each of our Federal Aviation Administration, or FAA, licensed Crewmembers,
which consist of pilots, dispatchers, technicians and inspectors as well as
air traffi c controllers. These agreements are intended to drive higher levels of
engagement and alignment with the Company’s strategy, culture of customer
service and overall fi nancial success. Each employment agreement is for
a term of fi ve years and renews for an additional fi ve-year term unless the
Crewmember is terminated for cause or the Crewmember elects not to
renew. Pursuant to these agreements, these Crewmembers can only be
terminated for cause. In the event of a downturn in our business calling
for a reduction in fl ying and related work hours, we are obligated to pay
these Crewmembers a guaranteed level of income and to continue their
benefi ts. In addition, we provide what we believe to be industry-leading
job protection language in these agreements in the event of a merger or
acquisition as well as the establishment of a legal defense fund to use in
connection with seniority integration negotiations.
Our leadership team strives to communicate on a regular basis with all
JetBlue Crewmembers in order to maintain a direct relationship with and
keep all Crewmembers informed about news, results and challenges
affecting the airline. Effective and frequent communication throughout
the organization is fostered through various means, including email
messages from our CEO and other senior leaders at least weekly, employee
engagement surveys, a quarterly digital magazine, active leadership
participation in new hire orientations and periodic open forum meetings
across our network, called “pocket sessions,” which are often videotaped
and posted on our intranet. By soliciting feedback for ways to improve our
service, teamwork and work environment, our leadership team strives to
keep Crewmembers engaged, make our business decisions transparent
and fi nd cost and revenue improvements that are best recognized by
Crewmembers closest to the activity.
Our full-time equivalent employees at December31, 2012 consisted of
2,204 pilots, 2,472 fl ight attendants, 3,550 airport operations personnel,
541 technicians (whom others refer to as mechanics), 945 reservation
agents, and 2,741 management and other personnel. At December31,
2012, we employed 10,573 full-time and 3,774 part-time employees.
Aircraft Fuel
Aircraft fuel is our largest expense representing nearly 40% of our total operating costs in 2012. The price and availability of aircraft fuel are extremely volatile
due to global economic and geopolitical factors we can neither control nor accurately predict. We use a third party fuel management service to procure most
of our fuel. Our historical fuel consumption and costs for the years ended December31 were:
2012 2011 2010
Gallons consumed (millions) 563 525 486
Total cost (millions) $ 1,806 $ 1,664 $ 1,115
Average price per gallon $ 3.21 $ 3.17 $ 2.29
Percent of operating expenses 39.2% 39.8% 32.4%
Total cost and average price per gallon each include related fuel taxes as
well as effective fuel hedging gains and losses.
Our approach to fuel price management seeks to provide a form of
insurance to protect against signifi cant and sharp increases in fuel prices.
We attempt to do so by entering into a variety of hedging instruments,
including swaps and collar contracts with underlyings of jet fuel as well
as crude and heating oil. We also use fi xed forward price agreements, or
FFPs, which allow us to lock in the price of fuel for specifi ed quantities
and at specifi ed locations in future periods. At December31, 2012, of our
projected 2013 fuel requirements, we had hedged approximately 5% and
managed approximately 6% with FFPs. In January and February 2013,
we entered into jet fuel swap and cap agreements covering an additional
6% of our 2013 projected fuel requirements.
Maintenance
Our FAA-approved maintenance program is administered by our technical
operations department. Consistent with our core value of safety, we
use qualifi ed maintenance personnel, ensure they have comprehensive
training and maintain our aircraft and associated maintenance records in
accordance with, if not exceeding, FAA regulations.
The maintenance work performed on our fl eet is divided into fi ve general
categories: modifi cation line, aircraft line maintenance, aircraft heavy
maintenance, component repairs and power plant maintenance. The
bulk of line maintenance requirements are handled directly by JetBlue
technicians and inspectors and consist of daily checks, overnight and